Tax Time Savings Bond Policy in Danger

Editor’s Note: The following editorial is provided by the D2D Fund, a non-profit which is dedicated to helping low-income consumers save money. The D2D Fund has been extremely supportive of our effort to Bring Back Paper Savings Bonds. Likewise, we are supportive of their position outlined in the article below and their work in general. You can follow them on twitter at @BondsMakeItEasy

Savings Bonds are a savings tool for everyone, but they are particularly essential for the 99% of low to middle income Americans that need an easy, safe and convenient way to save. This past year marked a change in American history- when young and old nationwide raised their voices and demanded equality. The demands were diverse, ranging from student debt to corporate taxes, but the events underscored a fundamental unfairness – that many are denied the right to save and accumulate wealth. Every American should have the opportunity to cement a solid foundation on which continuous wealth building is natural and easy. Simply put: the 99% should also have access to smart, competitive savings products that are offered at a convenient time from a trusted source. The Tax Time Savings Bond policy fit that bill.

For more than 75 years, savings bonds have introduced millions of small savers to the act of saving. Because of the low barrier to entry ($50), they enable those who may have never saved before to begin saving and are very often bought as gifts to celebrate important milestones like the birth of a new child or by a parent to save for the future of his or her child. There are no hidden fees and they offer a competitive interest rate. And because savings bonds are safe and competitive, they are a viable complement to any financial portfolio, regardless of financial status.

Introduced by the Obama administration in 2009, the Tax Time Savings Bond policy combined all the benefits of savings bonds with a time of year when low income households were already thinking about their finances, often sitting with tax preparers that could advise them, and receiving large lump sums of money they didn’t see year round. In the past three years, 100 million American households felt they had a policy made to help them achieve their American Dream. But now, this policy, currently the only way to purchase paper savings bonds, is in danger of becoming obsolete, only 3 years after it was implemented. With the paper savings bond program discontinued in 2011 and the tax time savings bond policy under threat, savings bonds are becoming less accessible to average Americans.

So, why is the tax time savings bond policy in danger? And why did year round paper bonds come to an end? In a quickly digitalizing world combined with a need for cost cutting, solutions to universal savings products lie in innovation. And yet, what is already solid is slowly collapsing before an alternative created. We propose the U.S. Treasury Department and the Bureau of Public Debt create an alternative, more accessible and year-round solution for distribution of savings bonds BEFORE eliminating the best currently available way for Americans to save. The current alternative, TreasuryDirect (www.treasurydirect.gov), does not go the distance in terms of providing an accessible way to purchase bonds, especially for the 65% of households that make less than $25,000 a year that lack broadband connections. Innovation could lead to technology advancement within Treasury while providing an acceptable, safe and attractive method for low to moderate income households to save. However, until we have a new solution, we cannot eliminate the Tax Time Savings Bond policy, leaving millions of Americans with no viable way to save.